Many dream of owning a home, sending their children to college or retiring sometime down the road. Where does the money come from to make these dreams come true? Mostly the money comes from investing over a period of time. Putting your hard-earned money to work for you now may mean a better future.
However, I have found many individual investors make mistakes when investing on their own. Here are a few common mistakes that I believe can be avoided:
1. Purchasing investments without first establishing an investment strategy. From the beginning, an investor should adopt an investment strategy to guide future decisions. A well-planned strategy takes into account for each goal, the amount needed, an amount to systematically contribute, a time horizon, diversification and risk.
2. Investing in individual stocks instead of creating a diversified portfolio of securities. By maintaining a broadly-diversified portfolio incorporating different asset classes and investment styles helps to offset the investment risk associated with an all-stock portfolio.
3. Selling low. This is the flip side of buying high which can be just as costly. Many investors are reluctant to sell a stock until they recoup their losses, because their ego refuses to acknowledge mistakes. Waiting for your investments to have a comeback may be unlikely.
4. Procrastination. Individuals often fail to begin an investment program simply because they don’t know how to get started. They are not certain if they need a short-term or a long-term strategy and are discouraged by the potential loss or declines in the stock market.
5. Many don’t know their real tolerance for risk. There is no such thing as risk-free investing. But there are ways to reduce risk. Individuals seeking greater rewards are generally able to assume more risk for longer-term goals.
How many of the above describe you? If the answer is more than one, you may benefit from the help of a financial advisor instead of trying to invest on your own.
For more information, please contact Rebecca Robins, CFP™, CPA at 661-222-2331. CA Insurance # 0D75745. Securities offered through Associated Securities Corp., Member: NASD/SIPC. Advisory Services offered through Associated Planners Investment Advisory, Inc., a Registered Investment Advisor.